Gilead Inks $21B Immunomedics Deal, Adding Trodelvy To Its Oncology Arsenal

Gilead Sciences (GILD) has now entered into a definitive agreement to buy Immunomedics for $88 per share in cash.

The transaction, which values Immunomedics (IMMU) at approximately $21 billion, is set to close during the fourth quarter of 2020. This represents a 108% premium to IMMU’s closing price on September 11, 2020.

Gilead will now own Trodelvy, a first-in-class Trop-2 directed antibody-drug conjugate that was granted accelerated approval by the U.S. Food and Drug Administration (FDA) in April for the treatment of adults with metastatic triple-negative breast cancer (mTNBC) who have received at least two prior therapies for metastatic disease.

IMMU also plans to submit a supplemental Biologics License Application (BLA) to support full approval of Trodelvy in the US in Q420, and to file for regulatory approval in Europe in 1H21.

In the Phase 3 ASCENT study, which was halted early due to efficacy, Trodelvy significantly improved progression-free survival (PFS) and overall survival (OS) in previously treated patients with advanced mTNBC. TNBC represents approximately 15 to 20% of all breast cancer cases and is generally considered the most aggressive form of breast cancer.

Beyond mTNBC, Trodelvy is also being studied in an ongoing Phase 3 trial in third line HR+/HER2- breast cancer and a registrational Phase 2 study in bladder cancer. HR+/HER2- breast cancer accounts for more than 70% of all breast cancers.

Additional ongoing studies are evaluating the potential of Trodelvy as a treatment for non-small cell lung cancer and other solid tumor types. According to Gilead, the drug ‘has significant commercial potential in mTNBC and other solid tumors.’

“This acquisition represents significant progress in Gilead’s work to build a strong and diverse oncology portfolio. Trodelvy is an approved, transformational medicine for a form of cancer that is particularly challenging to treat. We will now continue to explore its potential to treat many other types of cancer, both as a monotherapy and in combination with other treatments,” cheered GILD CEO Daniel O’Day.

Gilead says it will fund the acquisition through approximately $15 billion in cash on hand, as well as approximately $6 billion in newly issued debt.

“In addition to immediately accelerating Gilead’s revenue growth, the acquisition of Immunomedics is expected to be neutral to accretive to Gilead’s non-GAAP EPS in 2023 and significantly accretive thereafter” the company says.

After closing Gilead plans to initiate numerous additional mid- and late-stage studies to determine which patients will benefit from Trodelvy. It will retain global rights to Trodelvy outside of greater China, South Korea and certain Southeast Asian countries.

Analysts have a cautiously optimistic Moderate Buy consensus on Gilead, with an average analyst price target of $79. With shares flat year-to-date, this indicates 20% upside lies ahead.

JP Morgan’s Cory Kasimov says the deal brings a solid commercial asset in-house, but at a high price. According to Kasimov, Trodelvy has blockbuster potential in multiple solid tumor indications- telling investors “this is the type of tangible deal Gilead needs to try and inject some much needed growth into its future outlook.”

But he adds that “with a $21B price tag for a deal around a single asset that won’t be accretive for at least 3 years, there’s sure to be some sticker shock.”

Ultimately Kasimov retains his hold rating on GILD: “We’ll need to see how commercial traction, additional clinical updates / indications and competition evolve to better understand whether GILD can achieve a healthy return of this investment” the analyst concludes. (See Gilead stock analysis on TipRanks)